What Is a Non-Compete Agreement

A Non-Compete Agreement prevents someone—like a former employee, contractor, or founder—from walking away and setting up shop as your competitor.

It restricts them from starting a similar business, joining a rival, or poaching clients for a set time and in a defined location.

✅ Why it matters: You’ve built your brand, client base, and business model. A non-compete ensures someone doesn’t walk away with that competitive edge and replicate it elsewhere.

When to Use a Non-Compete Agreement

• Hiring Freelancers or Consultants
  If you’re working with independent contractors—especially in roles involving your pricing, marketing strategy, proprietary process, or client relationships—a Non-Compete Agreement prevents them from launching a similar business or poaching your clients later.
• Onboarding Key Employees
  Critical hires who access sensitive business knowledge (like your go-to-market strategy, product roadmap, or customer acquisition channels) should sign a non-compete to protect your competitive advantage—even after they leave the company.
• Selling a Business
  Buyers want assurance that former owners, founders, or executives won’t immediately start a competing venture. A Non-Compete Agreement becomes a standard part of M&A transactions to safeguard the business’s goodwill and valuation.
• Launching Joint Ventures or Agency Partnerships
  When two businesses collaborate on a campaign, product, or service, there's a risk that one party could replicate the other's model. A non-compete prevents vendors, agencies, or partners from using your IP or strategy to compete in the same market.

Checklist: What to Include in Your Non-Compete Agreement

✅ Parties covered (who’s restricted and who’s protected)
✅ Duration of restriction (typically 6–12 months)
✅ Geographic limits (e.g. city, state, country)
✅ Specific industries, roles, or clients covered
✅ Remedies for breach (e.g. damages, injunctive relief)
✅ Consideration (payment or benefit in exchange)

✔ SMVRT Legal’s Non-Compete Agreement is state-aware and easy to tailor.

Common Non-Compete Mistakes

⚠️ Overly Broad Terms
Courts reject non-competes that feel unfair or unnecessary—keep it focused.

⚠️ Missing Consideration
You must give the other party something of value for the agreement to stick.

⚠️ Violating State Law
Some states (like California) ban most non-competes. Know your state.

⚠️ Confusing With Other Clauses
A non-compete isn’t the same as a non-solicit or NDA—make sure it’s clearly defined.

Non-Compete vs. NDA vs. Non-Solicit

Understanding the difference between a Non-Compete, NDA, and Non-Solicit Agreement is essential when protecting your business relationships, ideas, and assets. Here’s how they compare:

• Non-Compete = Prevents Direct Competition
  Restricts someone from starting, joining, or working with a competing business—usually within a specific geographic area and timeframe.
  ✅ Best for: Protecting business models, market share, and customer relationships.
• NDA (Non-Disclosure Agreement) = Prevents Information Sharing
  Stops individuals or businesses from disclosing or misusing confidential information—like product roadmaps, pricing, or strategy.
  ✅ Best for: Keeping proprietary knowledge and trade secrets private.
• Non-Solicit = Prevents Poaching
  Blocks someone from soliciting your employees, clients, or vendors after the business relationship ends.
  ✅ Best for: Retaining team members and protecting customer lists.